1. Field of the Invention
The present invention generally relates to a system and method for identifying customers at risk of revenue change (e.g., loss or gain), and more particularly to a system and method for identifying companies, organizations, accounts, or clients at risk of revenue change (e.g., revenue loss or gain) and sources of such revenue change (e.g., revenue loss or gain).
2. Description of the Related Art
Over the last 10 years there has been a proliferation of large and expensive services contracts. Motivated by a need to reduce cost, control expenses and increase efficiency, more and more companies are relying on service providers to handle a part of their non-core business. For example, companies may rely on services providers for IT outsourcing, various aspects of IT service and maintenance, business process outsourcing, or business consulting.
Over the last three decades, there has been an explosion of information technology (IT) infrastructure, followed by increased sophistication in information processing, business analytics and application software. As the technology has continued to evolve, IT spending has become one of the dominant line items in companies' budgets.
Furthermore, in today's marketplace, businesses have realized that in order to be competitive and efficient, they need to develop IT infrastructure, invest in state-of the art applications, business processes and practices. Given constant advances in technology and continually changing business practices, where some of the “latest” solutions could become obsolete in less than a year, a large number of companies have struggled to keep their IT investments up to date, to revitalize their legacy systems, optimize new investments, and maintain current business practices, while keeping the IT spending under control.
To solve this problem, many businesses outsource a part of their IT operations, or hire an external company to perform some of their business processes or service some non-essential components of their business. This has contributed to the growth of services business, and today there are numerous service providers and firms that specialize in operating IT efficiently, running complex business processes, or providing high-level strategy consulting.
These services contracts are typically very expensive and are delivered through a multi-year engagement, which yields a substantial amount of revenue to the services provider.
However, if for any reason a company receiving the service decides to terminate the agreement (or a portion of it), downsize the amount of services needed under the agreement to meet a decrease in demand (“re-scoping”), or renegotiate the agreement to achieve a better price, the services provider may incur a significant change (e.g., revenue loss) of revenue (often in a range of several billion or hundreds of millions of dollars).
As a result, services providers are interested in tracking their portfolio of customers and forecasting the risk of severe revenue loss.
The known approaches are typically based on the use of customer satisfaction reports and metrics, in which, in order to determine the “riskiness” of a contract, each metric is multiplied by empirically determined weight factors and the risk score is computed as the sum of these weighted features.
However, the conventional approaches are not capable of measuring the risk exposure in today's complex environment (e.g. under the influence of multiple, often mutually-related, risk factors), and for that matter, do not even contemplate measuring such risk exposure based on complex risk factors.